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Myers Industries

Despite challenging economic conditions, Myers Industries Inc. (MYE - Free Report) saw strong second-quarter earnings growth of 21.4%, resulting in upward earnings momentum in the last month. This polymer products manufacturer is a Zacks #2 Rank (Buy) and offers a dividend yield of 2.0%. The company is expected to deliver double-digit growth in earnings in 2012 and beyond.

Challenging but Promising Second Quarter

On July 19, Myers came out with second quarter earnings of 17 cents per share, which was in line with the Zacks Consensus Estimate and above last years 14 cents.

Revenues grew 2.2% to $181.1 million. The increase was attributable to strong sales in the Engineered Products segment and moderate sales in the Lawn & Garden segment, which more than offset lower sales in the Material Handling and Distribution segments.

Although the companys earnings are expected to be hurt by the sluggish economy, the company believes that the shifting of orders from the second quarter to late 2012 will result in a solid performance for the full year.

Acquisition of Plasticos Novel

On July 9, Myers completed the acquisition of Plasticos Novel, a leading designer and manufacturer of plastic totes and crates used for the fast growing food and agriculture industries in Brazil.

Novel will complement Myers material handling business in Brazil and fulfill its target of expanding in North and South America. Novels annual sales are projected to be $38 million in 2012.

Earnings Estimates Edge Upward

Following the announcement of the Novel acquisition and its second-quarter results, three of 4 estimates for 2012 have been revised upward in the last 30 days, pushing the Zacks Consensus Estimate up by a penny or 1.1% to 92 cents.

The Zacks Consensus Estimate for 2013 stayed at the same level of $1.08, despite 2 of 4 upward revisions in the same period. The estimates for 2012 and 2013 represent expected annualized growth of 37.3% and 17.7%, respectively.

Consistently Higher Dividends

Since June 1, 1992, Myers has been consistently paying dividends with a raise every year (except in 2009), reflecting its efficient management policy and sound financial position. The company last raised its quarterly dividend on March 5 by 14.3% to 8 cents, representing a payout ratio of 40.0% and a yield that is higher than its trailing 12-months average dividend yield of 1.90%. The dividend growth is also higher than the year-ago level of 7.7%.

Valuation: Expensive but Reasonable

Myers is currently trading at a forward P/E of 17.0x, a 25% premium to the peer group average due to its strong earnings growth trajectory, mainly based on expansion strategies. Apart from P/E, Myers price-to-book of 2.4x is higher the peer group average of 1.1x. The company also has a 1-year ROE of 12.9%, which is significantly better than its peer group average of 4.0%.

Chart Looks Promising

The price and consensus chart reveals that the stock has cut across the 2012 earnings estimate line after hovering below it before December of last year. The stock has started catching up with the 2013 estimate line, which implies that it is likely to steer ahead given the rising estimates.

Despite a soft economic outlook, Myers is likely to continue outgrowing its peers based on its strategic expansions, cost control and productivity improvements. Furthermore, with stable earnings estimates, a solid dividend yield and a reasonable valuation, the stock is definitely a good choice for investors seeking both growth and income.

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